Why Do Larry Page, Zuckerberg and a Few Other CEOs Take $1 Salary

Without thinking twice about it, it is understandable to learn that a wealthy elected politician has opted to forgo his salary and take a $1 pay as a sign of good gesture or in order to give back to the economy of the place he governs. This, however, will raise questions if the person happens to be the CEO or top executive of a multi-million company who many would think was in business for the money.

A number of CEOs and top executives of some of the largest businesses in the United States have opted to take a $1 salary instead of the hefty paychecks that their work most definitely deserves. People like Tesla Motors and SpaceX’s Elon Musk, Oracle Corporation’s Larry Ellison, Alphabet Inc.’s Larry Page, and Facebook’s Mark Zuckerberg, are only but a few of the CEOs in recent time who have signed on to this payment package. But while this concept appears to have gained traction in recent years with this generation of fortune 500 CEOs, the idea and practice has been in existence for longer than their companies have been around.

The concept of executives taking home a $1 salary first emerged in the early 1900s when various American industry leaders offered their services to the government during times of war, notably World War I, World War II, and the Korean War. It is said that the executives could have opted to work for free but because US law forbids the government from accepting the services of unpaid volunteers, those who the government has employed must be paid a nominal salary, which establishes the legal relationship as employees of the government.

Some of the first people to accept a $1 salary are forester Gifford Pinchot, labor leader Sidney Hillman, and lawyer Max Lowenthal who all played key roles in one way or another as a part of the American government. Bernard Baruch was the first businessman to join the exclusive low annual pay club while Massachusetts Governor Alvan T. Fuller was the first politician to serve in various governmental positions on those terms.

In recent time, government officials like California Governor Arnold Schwarzenegger, former Massachusetts Governor Mitt Romney, and New York City Mayor Michael Bloomberg have opted to take $1 salaries. But unlike these people, their business counterparts in recent time who have opted to take a huge pay cut are not doing it because of the love of their country. Here is why they have chosen to do so.

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Why Do CEOs Take $1 Salary

In 2017, a report by the Economic Policy Institute said that the salaries of the highest-paid CEOs in the world are 312 times more than that of their median employee’s salaries. This has caused great division among policymakers as some point it out as a clear indication of greed while others say it is nothing short of the compensation that the CEOs deserve due to how difficult, stressful, and time-consuming their job is as can be seen in the lives of Musk and Apple’s Tim Cook who are both famous for practically having no life outside the workspace.

Regardless of this, some CEOs like Musk have still opted to take a $1 salary even though it is evident that they give their all and that their companies are not struggling. One person who notably did it for this reason, is the late Steve Jobs who took a $1 salary as a way of showing how much he cared about the company he had co-founded in his parents’ garage following his return but more so because the company was barely afloat.

Another reason why many of these CEOs might opt to not take their million-dollar salaries is because of the incentives of an alternative to a salary. Instead of an annual paycheck, these CEOs take up stock options that are usually tied to their management performance since stock prices are a reflection of the actual value of the company. This means that a CEO who is paid a salary can afford to not put in the work but still earn his money while the other knows that his pay at the end of the day is determined by his work. A plus side to this is that these stock options can also turn out to be much more valuable than the paycheck on the long run.

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